81 FR 49897 - Amendments to Designated Areas

DEPARTMENT OF THE INTERIOR
Office of Natural Resources Revenue

Federal Register Volume 81, Issue 146 (July 29, 2016)

ONRR convened two technical conferences on November 20, 2015 to discuss amending the boundaries of four of the designated areas it uses to calculate the index-based major portion prices in its regulations. At the technical conferences, the participants discussed issues regarding the appropriate boundary line between the North Fort Berthold and South Fort Berthold Designated Areas and adding additional counties to one or both of the two designated areas in the Uintah and Ouray Reservation.

[Federal Register Volume 81, Number 146 (Friday, July 29, 2016)]
[Rules and Regulations]
[Pages 49897-49898]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-17599]


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DEPARTMENT OF THE INTERIOR

Office of Natural Resources Revenue

30 CFR Parts 1206 and 1210

[Docket No. ONRR-2014-0001; DS63642000 DR2PS0000.CH7000167D0102R2]


Amendments to Designated Areas

AGENCY: Office of the Secretary, Office of Natural Resources Revenue 
(ONRR), Interior.

ACTION: Final rule.

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SUMMARY: ONRR convened two technical conferences on November 20, 2015 
to discuss amending the boundaries of four of the designated areas it 
uses to calculate the index-based major portion prices in its 
regulations. At the technical conferences, the participants discussed 
issues regarding the appropriate boundary line between the North Fort 
Berthold and South Fort Berthold Designated Areas and adding additional 
counties to one or both of the two designated areas in the Uintah and 
Ouray Reservation.

DATES: Effective: September 1, 2016.

FOR FURTHER INFORMATION CONTACT: Elizabeth Dawson, ONRR, telephone at 
(303) 231-3653, or email to [email protected].

SUPPLEMENTARY INFORMATION: With this final rule, ONRR amends the four 
designated areas to define them as follows:
    1. North Fort Berthold--all lands within the Fort Berthold 
Reservation boundary north of the Missouri River, including the Turtle 
Mountain public domain lease lands north of the Missouri River that the 
Fort Berthold Agency of the Bureau of Indian Affairs (BIA) administers, 
with the dividing line of the Missouri River being the county lines 
that follow the Missouri River.
    2. South Fort Berthold--all lands within the Fort Berthold 
Reservation boundary south of the Missouri River, including the Turtle 
Mountain public domain lease lands south of the Missouri River that the 
Fort Berthold Agency of the BIA administers, with the dividing line of 
the Missouri River being the county lines that follow the Missouri 
River.
    3. Uintah & Ouray--Emery, Uintah, and Grand Counties.
    4. Uintah & Ouray--Duchesne, Wasatch, and Carbon Counties.
    Under the new Indian Oil Valuation Amendments to 30 CFR 1206.54 (80 
FR 24794 dated May 1, 2015), ONRR uses designated areas to calculate 
index-based major portion prices for lessees to comply with the major 
portion provisions in their leases. Designated areas are those areas 
ONRR identifies as unique based on their location and the crude type 
produced from their respective Indian lands.
    When ONRR proposed the new Indian Oil Valuation Amendments, it 
proposed sixteen initial designated areas. Generally, these designated 
areas were the Indian reservation boundaries. However, there were five 
designated areas which were not the reservation boundaries: Oklahoma; 
North Fort Berthold; South Fort Berthold; Uintah & Ouray: Uintah and 
Grand Counties; and Uintah and Ouray: Duchesne County.
    Under the new Indian Oil Valuation Amendments, to modify or change 
an existing designated area, ONRR must convene a technical conference. 
In implementing the new Indian Oil Valuation Amendments, ONRR 
discovered two potential issues. First, the preamble describes the 
dividing line between the North Fort Berthold Designated Area and the 
South Fort Berthold Designated Area as the Little Missouri River. 
Second, ONRR found at

[[Page 49898]]

least one producing Indian lease that is in Wasatch County in the 
Uintah and Ouray Reservation, which is outside of both of the 
designated areas listed in the Uintah and Ouray Reservation. ONRR also 
identified two other counties--Carbon and Emery Counties--in the Uintah 
and Ouray Reservation that were not in the listed designated areas that 
do not currently have Indian leases but could in the future.
    To address these issues, ONRR held two technical conferences. ONRR 
published notice of the technical conferences in the Federal Register 
on October 29, 2015. 80 FR 66417. The first technical conference was 
held in person on November 20, 2015, at 9:00 a.m., Mountain Time in 
Denver, Colorado, at the Office of Natural Resources Revenue, Denver 
Federal Center, 6th Avenue and Kipling Street, Building 85, Auditoriums 
A-D, Denver, Colorado 80226. The second technical conference was a 
teleconference on November 20, 2015, at 2:00 p.m. Mountain Time. 
Fifteen people attended the technical conferences, of which seven were 
from ONRR, three from Tribes, and five from industry.
    ONRR also solicited comments on the proposed changes through 
November 30, 2015. On February 17, 2016, ONRR consulted with the Ute 
Indian Tribe on adding the Wasatch, Carbon, and Emery Counties to the 
two Uintah and Ouray Designated Areas. Also, on March 4, 2016, ONRR 
consulted with representatives of the Three Affiliated Tribes on 
changing the boundary line between the North Fort Berthold and South 
Fort Berthold Designated Areas.
    Public Comments: Generally, the parties attending the technical 
conference and consultations agreed with ONRR's proposal to modify the 
definition of the (1) Uintah and Ouray Designated Areas to include 
Wasatch, Carbon, and Emery Counties; and (2) North Fort Berthold and 
South Fort Berthold Designated Areas to use the Missouri River as the 
boundary line between the two designated areas rather than the Little 
Missouri River. ONRR received three additional comments: One from 
industry, one from an individual Indian mineral owner, and one from a 
Tribe.
    Public Comment: The individual Indian mineral owner sent a comment 
stating he did not support dividing the Fort Berthold Reservation into 
two designated areas for five reasons: (1) The idea of selling price by 
field is an anachronism; (2) the price must be the highest in the world 
wherever that may be because industry uses the tax code, hedging, 
swaps, etc. in order to obtain the highest price; (3) this attempt to 
reduce price is a taking under Hodel because this regulation denies the 
beneficiary the difference between the market rate and major portion; 
(4) there is no basis for allowing a transportation deduction because 
typical carriers charge consumers for transportation rather than the 
mineral owner; and (5) North Dakota recovered millions because 
deductions were not in their leases and, likewise, Indian leases do not 
authorize this illegality.
    ONRR Response: The technical conference was simply to discuss 
amending the Fort Berthold designated areas to use the Missouri River 
rather than the Little Missouri River to divide the two designated 
areas. These comments apply to the Indian Oil Valuation Amendments as a 
whole and do not directly relate to the appropriate boundary for the 
two Fort Berthold designated areas. ONRR addressed comments similar to 
the one above in the preamble of the final rule, which can be found at 
80 FR 24,794 (May 1, 2015).
    Public Comment: The industry commenter suggested that ONRR take 
this opportunity to divide the Fort Berthold Reservation into three 
designated areas: The first designated area would include lands north 
of the Missouri River, the second would include the lands south of the 
Missouri River and north of the Little Missouri River, and the third 
would include the lands south of the Little Missouri River. The 
commenter believes the available transportation infrastructures support 
dividing the Fort Berthold Reservation into three designated areas 
because the lands north of the Little Missouri River have evolving 
pipeline facilities that can transport production from the lease, 
whereas leases south of the Little Missouri River do not have the same 
available infrastructure.
    ONRR Response: Dividing the Fort Berthold into two designated areas 
was a compromise negotiated by the Indian Oil Negotiated Rulemaking 
Committee (Committee). Generally, industry advocated using specific 
fields as designated areas. Alternatively, Tribes and individual Indian 
mineral owners promoted a broader area. Ultimately, the Committee 
agreed to divide Fort Berthold into two designated areas as a 
compromise. To date, ONRR has found no reason to ignore the conclusions 
of the Committee.
    The final rule and the preamble of the proposed rule specifically 
allow lessees/operators, Tribes, and Indian mineral owners to petition 
ONRR to convene a technical conference to review, modify, or add 
designated areas where there is a significant change that affects the 
location and quality differentials. The rule has not yet been in effect 
for a period of time sufficient to demonstrate that there has been a 
significant change in the market on the Fort Berthold Reservation. 
Should the markets change in the future, the lessees/operators, Tribes, 
or individual Indian mineral owners can petition ONRR to change the 
designated areas in the future. The purpose of this technical 
conference was to change the boundary between the two Fort Berthold 
designated areas, not to add another designated area. Therefore, adding 
a designated area was outside the scope of this technical conference.
    Public Comment: The Ute Indian Tribe indicated it would prefer to 
have Wasatch and Carbon Counties added to the Uintah & Ouray-Duchesne 
County Designated Area and Emery County added to the Uintah & Ouray-
Grand and Uintah Counties Designated Area. The Tribe indicated the 
infrastructure on the Uintah & Ouray Reservation supported this 
configuration.
    ONRR Response: ONRR agrees with this comment and has modified the 
definition of the two designated areas in the Uintah and Ouray 
Reservation by adding Wasatch and Carbon Counties to the Uintah & 
Ouray-Duchesne County Designated Area and Emery County the Uintah & 
Ouray-Grand and Uintah Counties Designated Area.

    Dated: June 28, 2016.
Gregory J. Gould,
Director, Office of Natural Resources Revenue.
[FR Doc. 2016-17599 Filed 7-28-16; 8:45 am]
 BILLING CODE 4335-30-P